RBC Capital has reduced its 12-month price target for Datadog (DDOG) to $150 from $175, while maintaining an Outperform rating on the shares. The company’s stock is trading at $112.63 and has declined 13.45% over the past week, according to InvestingPro data.
The revision comes in advance of Datadog’s scheduled earnings release on February 10 and an analyst day set for February 12. RBC attributed the lower target to compression in peer multiples, a factor that prompted the firm to moderate its valuation on the software and observability specialist.
InvestingPro data shows Datadog trading at a price-to-earnings ratio of 361.17, underscoring the premium investors currently assign to the name despite its near-80% gross profit margins. RBC analyst Matthew Hedberg expects the company to report strong fourth-quarter results, but he also anticipates that management may provide cautious revenue and margin guidance for upcoming periods.
Hedberg warns that such conservative forward guidance could place downward pressure on the stock in the short term, though he frames a tempered outlook as a potential clearing event - a moment that could reset expectations and allow the market to re-evaluate the shares on new information.
RBC said it expects Datadog’s analyst day to emphasize several strategic areas: how the company is positioning itself in an AI-driven environment, its competitive landscape, security offerings, go-to-market strategy and commentary on margins. The firm does not anticipate management will announce long-term financial targets during that event, but it nonetheless preserved its Outperform rating despite cutting the price target.
Several other brokerages have recently updated their Datadog views, producing a mixed set of valuations and recommendations that reflect differing assessments of the company’s near-term outlook and strategic links to AI partners.
- KeyBanc Capital Markets trimmed its price target to $155 while keeping an Overweight rating, citing concerns about Datadog’s 2026 guidance.
- BMO Capital reduced its target to $170, pointing to worries about fiscal 2026 outlook and the possibility of changes in OpenAI’s use of Datadog’s platform.
- Scotiabank adjusted its target to $180 and referenced a $310 million revenue run rate from OpenAI in its analysis.
- DA Davidson reiterated a Buy rating with a $225 price target, identifying Datadog as a top pick in the software sector driven by AI momentum.
- Bernstein maintained an Outperform rating and a $180 target amid market chatter about a potential GitLab acquisition.
Together, these analyst moves illustrate a blend of cautious optimism and concern among market watchers. Some firms remain bullish based on AI-related upside, while others have reduced targets over uncertainty around longer-term guidance and partner dynamics.
Key points
- RBC cut its Datadog price target to $150 from $175 but kept an Outperform rating.
- Datadog trades at a P/E of 361.17 with gross margins near 80% and faces focused scrutiny ahead of earnings and an analyst day.
- Other analysts have varied stances and targets, reflecting mixed views on 2026 guidance and revenue from partners like OpenAI.
Risks and uncertainties
- Conservative forward revenue and margin guidance from Datadog could weigh on the stock - impacting software and cloud-focused investors.
- Potential changes in how OpenAI uses Datadog’s platform create uncertainty around a cited $310 million revenue run rate - relevant to AI-related revenue assumptions.
- Peer-multiple compression may continue to pressure valuation metrics for Datadog and comparable software names.